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Corporate income and franchise taxes

Taxable income

How is taxable income determined in your state? To what extent is the state income tax base aligned with the federal income tax base?

Alaska levies a corporate income tax on Alaskan taxable income, which is based on federal taxable income with certain Alaskan adjustments.

How is in-state income apportioned for multi-state businesses? Does your state regulate transfer pricing?

Multistate corporations apportion income on a ‘water's edge’ basis using the standard apportionment formula provided for under the multistate tax compact of property, payroll, and sales.

Alaska has modified apportionment for oil and gas producers and pipeline transportation companies. Petroleum businesses use a modified apportionment formula which is applied to worldwide income. A corporation’s worldwide income is apportioned to Alaska, based on the average of its:

  • tariffs and sales;
  • oil and gas production (extraction); and
  • property.

Nexus

How is nexus determined for corporate income tax purposes?

Alaska takes the position that nexus includes engaging in the generation of income from sources within the state without regard to whether there is a physical presence in the state. The Alaska Supreme Court has held that there must be a minimal connection with Alaska, which is established if the corporation “avails itself of the substantial privilege of carrying on business within the State” (Atlantic Richfield Co. v. State, 705 P.2d 418, 430 (Alaska 1985). Internal quotation marks and citations omitted). However, interest income earned on property in Alaska is not by itself sufficient to establish a taxable or business situs in Alaska (See Alaska Statute 43.20.040(c)).

Is affiliate nexus recognized in your state? If so, to what extent? Has there been any notable case law in this area?

Alaska has not adopted legislation recognizing affiliate nexus.

Rates

What are the applicable corporate income tax rates?

Alaska corporate income tax rates range from 0% to 9.4%, among 10 tax brackets.

Exemptions, deductions and credits

What exemptions, deductions, and credits are available?

Alaska generally follows the Internal Revenue Code to determine whether an entity is taxable. Further, it has adopted the flow-through federal provisions that exempt S corporations from tax.Certain small corporations that have less than $50 million in assets and meet certain industry requirements are exempt from corporate income tax.

A number of credits may be applied against Alaska corporate income taxes, including:

  • the credit for gas storage facilities;
  • the credit for the in-state manufacture of urea, ammonia, or gas-to-liquid products;
  • the credit for donations to educational institutions;
  • the oil and gas alternative credit for exploration;
  • the oil and gas refinery infrastructure credit;
  • the gas exploration credit;
  • the mineral exploration credit; and
  • the veteran employment credit.

Filing requirements

What filing requirements and procedures apply? Are there special filing requirements for groups of company?

Corporate income tax returns must be filed annually. The Alaska return is due 30 days after the federal tax return, with federal extensions. Electronic filing is required.Corporations must make quarterly estimated payments. The total tax is generally due by the 15th day of the fourth month following the end of the tax year. There are no payment extensions. Payments with a return greater than $150,000 and estimated payments greater than $100,000 must be made online or by wire transfer.

Corporate franchise tax If your state imposes a corporate franchise tax, please stipulate:

(a) The applicable tax base.

N/A

(b) Tax rates.

N/A.

(c) Any exemptions or deductions.

N/A.

(d) Filing formalities.

N/A.

Does your state impose a corporate franchise tax? If so, is it imposed in lieu of or in addition to corporate income tax?

There is no state corporate franchise tax in Alaska.

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